When Subscription Outpaced Advertising Growth…

30 Mar,2020

Source: FICCI EY M&E Report 2019


By Indrani Sen


The FICCI EY M&E Report ‘The era of consumer A.R.T. – Acquisition Retention and Transaction,’ released on March 27, 2020 shows that the Indian Media and Entertainment (M&E) sector outperformed the Indian economy (nominal GDP growth) for the third successive year with a growth of 8.9% over 2018 and reached INR1.82 trillion (US$25.7 billion) in 2019.


Advertising revenue grew 5.3% while subscription revenue grew 9.3% in 2019. Subscription growth was driven by OTT video consumption (111%), film (10%) and television (7.5%) which resulted in EY labelling 2019 as “The Era of Consumer A.R.T. – Acquisition, Retention and Transition”.

Source: FICCI EY M&E Report 2019


Ashish Pherwani, Partner & M&E Sector Leader, EY India has added a word of caution in his forwarding note. “The current situation around the Coronavirus will, unfortunately, impact the 2020 estimates we have provided in this report, and we will update the same as soon as we can reasonably estimate its impact,” he has written. Coronavirus is going to affect both the Indian Economy as well as the M&E sector. While it is certain that the growth rates of both will see dips, how much they will dip remain a matter of speculation at this stage.


As things stand now, it is unlikely that the Indian economy will see a negative growth, but it is highly possible that M&E sector may experience the same as it did in 2009 after the international financial crisis of 2008 triggered by the sub-prime mortgage crisis in the US. Effectively, we can use the FICCI EY M&E Report 2019 for reviewing the trends and growth different media in 2019 over 2018, but cannot rely on the future forecasts shown in the report, till EY releases an update.


In 2019, two traditional segments, print and radio ended the year with de-growth in ad revenues, despite their growth curves remaining relatively flat for the first seven to eight months of 2019. However, print remained the second-largest segment after television, followed by Digital media as the third.


Digital media rode on growth of both subscription and ad revenue and overtook filmed entertainment in 2019 to become the third largest segment of the M&E sector. Digital subscription revenues more than doubled from 2018 levels and digital advertising revenue grew to attain a share of 24% of total advertising spend.


Online gaming retained its position as the fastest growing segment on the back of transaction-based games and a 31% growth in the number of online gamers to reach around 365 million.


The following table shows the details of the growth by different media in 2019:

Source: FICCI EY M&E Report 2019


A detailed analysis reflects that ad spends increased by INR40 billion in 2019 over 2018 due to INR37 billion growth in digital and an INR15 billion growth in television, reduced by a fall of INR12 billion across local traditional media (print, radio, OOH).  Advertising growth was muted due to overall economic slowdown in 2019 which also impacted festive ad spending.


Source: FICCI EY M&E Report 2019


The growth in subscription revenue was driven largely by the proliferation of mobile access, enabling on-demand, anytime-anywhere consumption of content across India, in both urban and rural areas. In a country with 1.3 billion population, we have 688 million internet subscribers and nearly 400 million smartphone users and a tele-density nearing 89% of households. Riding on such statistics, India’s telecom industry is poised to become the primary platform for content distribution and consumption. Today, India ranks as one of the fastest-growing app markets across the world with entertainment apps as well as gaming apps driving significant consumer engagement which is likely to accelerate as people are forced to stay at home and work from home during the current 21 days lockdown and in the event of the lockdown extending beyond mid-April, 2020.


We can safely assume that in 2020, the effects of Covid-19 will be more on ad revenue than on subscription revenue in the M&E sector.  It is too early to make any estimate regarding the effects on ad revenue of individual segments of the M&E sector. With the rush of migrant labourers wanting to go back to their home states, we seem to be sitting on the tip of an iceberg as we step into the crucial first week of April/the second week of nationwide lockdown to fight the deadly Coronavirus, to hope and to ensure that India does not get into the stage of community transmission.



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